CEO: Group 1 Automotive impacted by high gas prices, low consumer confidence
Group 1 Automotive, Inc. (NYSE:GPI) CEO Earl Hesterberg said the auto dealer is being hurt by record-low new vehicle sales and weak consumer confidence. Hesterberg made the comments during a morning conference call with investors and analysts.
“The overall selling environment certainly got more challenging during the second quarter. Beginning with Memorial Day weekend, the market took another significant step down,” Hesterberg said. “Customer traffic declined further as consumer confidence was again shaken due to the higher gasoline prices and issues surrounding the financial markets.”
Because of high gas prices, the shift to cars from trucks in terms of units sold is “unprecedented in magnitude,” he said.
In a morning press release, Group 1 lowered its 2008 guidance for income from continuing operations — excluding one-time costs — to a range of $2.65 to $2.95 per share, from a previous range of $2.95 to $3.25 per share. Wall Street expects earnings of $2.68 per share.
Blaming a weak economic environment, the firm additionally lowered its acquisition revenue estimate to $200 million from $300 million.
Before Tuesday’s opening, the Houston-based company said its second-quarter profit dipped to $17.2 million, or $0.76 per share, versus $24.2 million, or $1.01 per share, a year ago. Excluding one-time charges related to franchise disposals, income from continuing operations was $19 million, or $0.84 a share. The results beat Wall Street’s expectation of earning $0.70 per share.
Quarterly revenue declined to $1.58 billion from $1.65 billion a year earlier. Wall Street analysts expected revenue of $1.63 billion.
In the midst of a challenging quarter, the CEO said there were some bright spots. Group 1’s parts and service segment and its finance business continue to be profitable, he said.
“The parts and service business has historically been relatively stable during sales downturns and we believe that this business should remain solid during the current decline,” the chief executive said. “In addition, with our continued focus and strategic improvements in the finance and insurance business, we have continued to grow our profit per retail unit, which at $1,078 per unit, was up $74 from the same period a year ago.”
Group 1 said it anticipates sales at stores open at least a year, or same-store sales, to decline between 6% and 7%.
In Tuesday afternoon trading, GPI is up 18.58%, or $3.20, to $20.42.
